For CFDHero, we do not enforce any minimum amount for your trading. First and foremost, CFDHero is not an investment platform. We are a Software-as-a-Service (SaaS) platform that merely provides an easy to use CFD trading bot software to traders.
How much capital you would need for your CFD trading strategy depends on a few factors, namely:
– the strategy
– the price per share
– your return objective
– your risk profile
Let us go through each of the points mentioned above.
There are many CFD trading strategies available. Two of the most common ones are DCA (dollar cost averaging) and Swing Trading. If your strategy has a buy-and-hold bias, such as DCA, your capital requirement would definitely be more than one that opens and closes positions fast. For example, a scalp strategy typically opens and close positions within a relatively short period of time. The invested capital is quickly recycled for the next trade. Hence, you do not need as much capital for a scalp strategy versus a DCA strategy.
Price Per Share
Obviously, a higher share price would require more capital to buy one unit of the CFD. Some brokers, like Robinhood, offer fractional share investing that allows traders to buy less than one unit of a share. Hence, for someone that wants to trade Apple on Robinhood, he or she does not need as much capital as another trader using a CFD broker that does not support fractional shares.
Your Return Objective
If you are targeting a 20% annual return with a minimum amount in mind (say $10,000), your capital must commensurate with the average return that your strategy offers. It is almost impossible to generate a $10,000 return from a capital of $1,000 from a normal CFD market trading strategy. If your return objective is purely a percentage of your invested capital, then trade with a capital where the returns would make sense for you to do this in the long run. Figuring out how much your trading capital should be is part art and part mathematics. Over time, you will fine tune your fund allocation to suit your returns objective.
Your Risk Profile
When you have decided on the fund size, ask yourself how much of these can you afford to lose without jeopardizing your livelihood. Trading is risky. If trading is a fail safe way to earn money, almost everyone of us would be trading. When you start off into the automated CFD trading journey, make sure you can afford to lose at least half of the capital without breaking a sweat. If you invest your entire life savings into a trading account, it is wise to take them all back and seek professional financial advice. Remember that trading is risky and hence, always trade with dispensable capital.
Using a CFD Trading Bot
At the end of the day, trading is a difficult exercise for most retail traders. A CFD trading bot is able to read real time market data and make trading decisions on the fly. Data backed trading is much more effective than trading on gut feel and emotions.
Trade intelligently with CFDHero.